from Cengige Service Department Charges In divisional income statements prepared
ID: 2519600 • Letter: F
Question
from Cengige Service Department Charges In divisional income statements prepared for Mills Construction Company, the Payroll Department costs are charged back to user divisions on the basis of the number of payroll checks, and the Purchasing Department costs are charged back on the basis of the number of purchase requisitions. The Payroll Department had expenses of $56,388, and the Purchising Department had expenses of $20,680 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: Residential CommercialGovernment 432,000 573,000 1,315,000 Number of employees: Weekly payroll ($2 weeks per year) 165 85 90 Monthly payroll 28 39 26 Number of purchase requisitions per year 2,000 1,400 1,300 a. Determine the total amount of payroll checks and purchase requisitions processed per year by the company and each division Residential Commercial Total Number of payroll checks: Weekly payrol Monthly payroll Total Number of purchase requisitions per payrol and purchasing costs charged back to the Residential, Commercial, and Government Contract divisions from payroll and b. Using the activity base information in (a), determine the annual amount of purchasing services. If required, round your answers to two Service department charge rates Payroil Department Purchasing Department decimal pleces. 0o not round your interim caluiations, round your answers to two decimal pleces per check per regaistion Government Contract Total Service department chargesExplanation / Answer
a) Residential Commercial Government Contract Total Number of payroll checks: Weekly payroll (52 Weeks x Weekly Payroll) 8,580 4,420 4,680 17,680 Monthly payroll (12 months x Monthly Payroll) 336 468 312 1,116 Total Payroll checks 8,916 4,888 4,992 18,796 Number of purchase requisitions per year: 2,000 1,400 1,300 4,700 b. Using the activity base information in (a), determine the annual amount of payroll and purchasing costs charged back to the Residential, Commercial, and Government Contract divisions from payroll and purchasing services. Do not round interim calculations. Service department charge rates: Payroll Department = $56,388/18796 checks $3.00 $ per distribution Purchasing Department = $20,680/4700 Requisitions $4.40 $ per requisition Residential Commercial Government Contract Total Service department charges: Payroll Department ($3 x Total Payroll Checks) $26,748.00 $14,664.00 $14,976.00 $56,388.00 Purchasing Department ($4.40 x # of purchase requisition) $8,800.00 $6,160.00 $5,720.00 $20,680.00 Total $35,548.00 $20,824.00 $20,696.00 c) Residential’s service department charge is higher than the other two divisions. Residential is a heavy user of service department services. Residential has many employees on a weekly payroll, which translates into a larger number of check-issuing transactions
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